Trends in traffic volumes

In document The economic impact of Internet traffic growth on network operators (Page 32-37)

Key Findings

3.5 Trends in traffic volumes

Key Findings

Traffic volumes for Internet Protocol (IP) traffic are increasing, both for fixed and for mobile networks; however, the percentage growth rate of traffic increase year over year is declining over time.

The increase in traffic is partly a function of an increase in the number of subscribers, and partly a function of an increase in traffic per subscriber.

There is no question that the Internet has experienced tremendous growth in traffic volumes in recent years. Over the years, there have been many predictions about the rate of growth of Internet traffic, many of them far off the mark.40 How much is traffic really growing, and how will growth rates in traffic develop in the coming years?

As with any prediction, there are inevitable uncertainties. Growth patterns depend on many factors, including macro-economic developments. A period of economic boom could stimulate Internet traffic and growth, just as a period of economic downturn could depress it.

A number of firms now provide reasonably credible forecasts of the growth of Internet traffic in the coming years. While forecasts differ, Cisco Systems provides a forecast that is respected and widely cited. The Cisco VNI forecast is built on analyst projections and actual usage reports, and is verified after the fact using real network data.41

Multiple sources, Cisco among them, suggest that Internet traffic is unlikely to grow in the future as it did in the past.

It is useful to begin by looking at historical trends. Ten to fifteen years ago, Internet traffic as a whole grew more than 100% annually, but has since slowed down to a more moderate pace. The absolute volume of traffic has continued to increase, but the rate of traffic growth is clearly declining. The Minnesota Internet Traffic Studies (MINTS) project, overseen by the respected expert Andrew Odlyzko, finds a clear historical trend of decreasing growth rates in Internet traffic (see Figure 9).42

40 Claims that Internet traffic was doubling every 100 days might have been correct for a single year (1995), but led to the overly optimistic belief that such growth rates would persist indefinitely (see Odlyzko (2003), p. 5).

41 Cisco (2014), “Cisco Visual Networking Index: Forecast and Methodology, 2013–2018”, 10 June 2014, available at http://www.cisco.com/c/en/us/solutions/collateral/service-provider/ip-ngn-ip-next- generation-network/white_paper_c11-481360.pdf.

Figure 9: Internet backbone traffic growth rates

Source: MINTS43

It is clear that historical growth rates in Internet traffic are diminishing rather than increasing. What overall growth should we expect in the years to come? The Cisco VNI forecast provides a useful indication overall (see Figure 10). Global fixed Internet and managed IP44 traffic is expected to grow from a volume of 59.9 Exabytes per month in 2014 to a volume of 115 Exabytes per month in 2018, but the annual rate of growth of IP traffic year over year is expected to decline slightly from 21% in 2014 to just 17% in 2018; moreover, these rates of growth are modest in comparison with Cisco VNI forecasts of just a few years ago.

43 See http://www.dtc.umn.edu/mints/home.php.

44 Cisco defines managed IP traffic as constituting including “corporate IP WAN traffic and IP transport of TV and VoD”. “Managed IP video is IP traffic generated by traditional commercial TV … This traffic remains within the footprint of a single service provider, so it is not considered Internet traffic.” Cisco (2014), Cisco Visual Networking Index: Forecast and Methodology, 2013–2018, 10 June 2014.

Figure 10: Cisco VNI forecast of global fixed Internet and managed IP traffic in Exabytes per month and associated growth rates (2014-2018)

Source: Cisco VNI online database (2014),45 WIK calculations

Many different factors are likely to contribute to traffic growth, including growth in the number of smartphone and tablet users, increasing broadband speeds, cloud computing, eHome, eHealth, HD-TV, and 3D video. Cisco is, however, of the view that video plays the dominant role in traffic growth going forward. “The sum of all forms of IP video, which includes Internet video, IP VoD, video files exchanged through file sharing, video-streamed gaming, and videoconferencing, will continue to be in the range of 80 to 90 percent of total IP traffic. Globally, IP video traffic will account for 79 percent of traffic by 2018”.46 Video is thus the largest driver of Cisco’s estimate of 21% Compound Annual Growth Rate (CAGR) in bytes of traffic per month (see also Figure 11).

45 See http://www.cisco.com/c/en/us/solutions/service-provider/visual-networking-index- vni/index.html#~overview.

46 Cisco (2014), The Zettabyte Era: Trends and Analysis, 10 June 2014. 60 71 84 99 116 21% 19% 18% 17% 17% 0% 5% 10% 15% 20% 25% 0,00 20,00 40,00 60,00 80,00 100,00 120,00 2014 2015 2016 2017 2018 Exab yte s / m o n th

Figure 11: Global IP traffic by application category (2013-2018)

Source: Cisco (2014)47

Mobile data in particular is expected to continue to experience rapid traffic growth due to widespread adoption of smart phones and the massive roll-out of 3G and 4G networks and associated retail pricing plans; nonetheless, mobile data will remain relatively small compared to fixed for the next few years (see Figure 12).

Figure 12: Cisco VNI forecast of fixed plus mobile Internet traffic in Petabytes per month in Europe (2013-2018)

Source: Cisco VNI online database (2014),48 WIK calculations

Mobile traffic is expected to grow year over year; however, as with fixed Internet and managed IP traffic, the percentage rate of annual growth is expected to decline over time (see Figure 13). Global mobile data traffic is expected to grow from a volume of 2.6 Exabytes per month in 2014 to a volume of 15.8 Exabytes per month in 2018; however, the annual rate of growth of mobile IP traffic year over year is expected to decline to slightly from 75% in 2014 to just 47% in 2018. These rates of growth (even though quite healthy) are far below those of Cisco VNI forecasts of just a few years ago.

48 See http://www.cisco.com/c/en/us/solutions/service-provider/visual-networking-index-

vni/index.html#~overview. These data represent the aggregated traffic of Western Europe, Central Europe, and Eastern Europe. Managed IP traffic is not included.

0 2000 4000 6000 8000 10000 12000 14000 16000 18000 2013 2014 2015 2016 2017 2018

Figure 13: Cisco VNI forecast of mobile Internet traffic in Exabytes per month and associated growth rates (2014-2018)

Source: Cisco VNI online database (2014),49 WIK calculations

In sum, Internet traffic is growing rapidly in absolute terms over both fixed and mobile networks, but by all estimates the rate of growth is declining over time.

3.6 Trends in the number of subscribers

In document The economic impact of Internet traffic growth on network operators (Page 32-37)